The New Debt Ceiling Deadline Is Going To Be Earlier Than We Thought

The U.S. is likely to exhaust its borrowing authority on the
earlier side of what Treasury Secretary Jack Lew had estimated,
he said in a letter to Congressional leaders on Wednesday.

Lew warned in the new letter that Congress will likely need to
raise the debt ceiling by late February to avoid a potential
default on the country's obligations.

As part of the bill to reopen the government in mid-October,
the debt limit was suspended through Feb. 7. The Treasury can use
so-called "extraordinary measures" after that point to keep
borrowing and paying the nation's bills for a few weeks
thereafter.

"While this forecast is
subject to inherent variability, we do not foresee any reasonable
scenario in which the extraordinary measures would last for an
extended period of time," Lew wrote in the letter, which was
addressed to House Speaker John Boehner (R-Ohio), House Minority
Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid
(D-Nev.), and Senate Minority Leader Mitch McConnell
(R-Ky.).

In the letter,
Lew urged Congress to raise the debt ceiling before Feb. 7, and
"certainly before late February."

"The Speaker
has said that we should not default on our debt, or even get
close to it, but a 'clean' debt limit increase simply won’t pass
in the House," Boehner spokesman Michael Steel said. "We hope and
expect the White House will work with us on a timely,
fiscally-responsible solution."

Lew had
said in a December letter to Congressional
leaders that the deadline would be sometime in late February
or early March. In the new letter, Lew wrote that a unique set of
circumstances in February would only provide the Treasury with a
few weeks of wiggle room through "extraordinary measures" after
Feb. 7.

Lew said that
the Treasury's capacity to use some extraordinary measures is
more limited than in 2011 or last year. And there will be
significant cash outflows in February due to the payment of tax
refunds.

"The significantly smaller amount of headroom that can be freed
up now will quickly be exhausted by the large obligations of the
government that occur in the month of February," Lew wrote.